Interest rates on newly issued subsidized Stafford loans are set to double on July 1 if Congress does not act. In general the leaders of both the House and Senate say that they want to block this rate increase for at least one more year, but they have put forward differing proposals on how to offset its budget cost.
The House bill (H.R. 4628) would cut a fund for public and preventive health care. The Senate bill (S. 2343) takes a far better approach: closing a tax loophole used by certain well-off professionals to avoid Medicare taxes—most famously used by former Sen. John Edwards (D-NC) and former House Speaker Newt Gingrich during their private-sector careers. The U.S. Treasury’s inspector general for tax enforcement has called the loophole a “multibillion dollar employment tax shelter.”
Seth Hanlon explains the so-called Gingrich-Edwards loophole and why closing it is a commonsense way to pay for the student loan fix.
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